Outside View: Patents laws and suffering innovators

BALTIMORE, May 2 (UPI) -- On March 16, new First-Inventor-To-File provisions of the Leahy-Smith America Invents Act took effect. The provision has been and will continue to be furiously debated as entrepreneurs and inventers will soon begin to feel the provision's sweeping consequences.

Previously, the United States followed a first-to-invent system. In that system, the filing date of a patent application filed with the U.S. Patent and Trademark Office was presumed to be the priority date. To overcome this presumption, inventors could claim they invented first by swearing behind a prior art reference or through interference practice to challenge an earlier filed patent or application claiming the same subject matter.

The revised law provides for the grant of a patent on the first filed application, rather than the first real inventor, except where there is derivation from an inventor who also filed an application. This eliminates the ability to swear behind a reference and the chance to pre-date an earlier filed patent or application using the interference procedure. The law, however, does provide an exception for those inventions that are derived from another. The provisions now establish derivation practice for attacking earlier filed applications by non-inventors.

This new system, though adopted by almost every other country, draws the criticism of many because it is viewed as rewarding those quickest to draft an application, rather than those who are innovating and inventing.

Ultimately, the change in the law creates a race to the patent office, potentially favoring larger well-funded companies over start-ups and small inventors. This race could lead to hastily drafted patent applications not thoroughly researched and developed. The need to prepare patent applications quickly could lead to an increase in attorney's fees driving up the cost on an already expensive process.

Regardless of the outcome, these changes will harmonize the United States with most of the rest of the world, currently operating under a first-to-file system.

While the America Invents Act made some drastic changes to the patent laws, additional laws are pending that seek to take patent reform even further. U.S. Rep. Peter DeFazio, D-Ore., and Rep. Jason Chaffetz, R-Utah, introduced the Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 to address issues related to Non-Practicing Entities or what are commonly referred to as "patent trolls.:

The act, HR 845, was reintroduced Feb. 27. The 2012 version of the bill failed to make it to the floor for a vote. The SHIELD Act will put the financial burden on the NPE rather than the innovator by allowing defendants to recoup money spent to successfully defend themselves.

Under the Act, NPEs that fail to prove during litigation that their asserted patent is valid and infringed must pay litigation costs and attorneys' fees incurred by the prevailing accused infringer.

But how are NPEs defined? There is growing concern that the widely used and often changing definition of an NPE doesn't just cover patent trolls but nearly every university that asserts its patents. Further, an NPE could even be a start-up company that has gained patent protection but, for various reasons, including funding issues, has yet to produce and manufacture a product.

The SHIELD Act doesn't define universities and technology transfer organizations as NPEs but it does include those who haven't sufficiently exploited their patented invention to the point of production or sale.

If the SHIELD Act passes as written, it will greatly affect the actions of those seeking to enforce their patents, whether its patent trolls aligning themselves with universities and acting as technology transfer organizations, or innovator companies choosing not to litigate in the first place.

The way patent pools license their technologies has also drawn a lot of attention in recent months. One example is MPEG LA's MPEG 2 pool, which charges exorbitantly large licensing fees for expired or soon-to-be-expired patents. Innovators are left with no option should they want to use the MPEG 2 video compression technology because MPEG LA has exclusive rights to license it.

With all these moving pieces revolving around the way American innovators and inventors protect their intellectual property it seems like the world we knew 10 years, five years, or even a year ago has completely evolved.

Though one thing remains certain, the American economy can no longer look to auto manufacturers in Detroit or the steel mills in Pennsylvania to sustain our economy.

We are known no longer as the nation of builders and have evolved into the nation of thinkers and innovators. However these drastic changes take shape, we must continue to ensure that our nation's brightest minds are still able to create and innovate so that the American economy can compete in an ever globalized market, particularly in the area of high technology.

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(Julie Hopkins is a principal of Palmer|Cooper|Hopkins in Baltimore where she practices all aspects of intellectual property law.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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